Staying the Course . . . Toward 1990s Japan?
University of Oregon economics professor and Economist’s View blogger Mark Thoma filed this guest post.
More than a year ago, I called for the Federal Reserve to begin aggressively removing toxic assets from the balance sheets of troubled banks in order to minimize the fallout from the collapse of the mortgage market. Shortly after that, the Paulson plan emerged, and the essence of the plan followed along these lines. But the plan was never implemented because of problems valuing the toxic assets, among other things, and with the election approaching, the decision was made to leave the toxic-asset problem for the new administration to resolve.
Once the new administration took over, it began developing its own plan, and after a few false starts, Timothy Geithner’s Public-Private Investment Program was announced. It appears that this plan may actually be put into place, but here we are more than a year from when everyone knew we had to do something, yet we are still waiting for a plan to be implemented. How much better would the economy be now if we had planned for something like this, and executed the plan immediately?
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Washington Post